Greg Smith to Goldman Sachs: A new era in Wall Street ethics

Greg Smith belongs to younger generations that put loyalty to values above loyalty to company. As young professionals ourselves, we believe his op-ed resignation from Goldman Sachs last week may well forecast a new era in ethics on Wall Street and in other workplaces.

Richard Drew/AP
Traders work in the Goldman Sachs booth on the floor of the New York Stock Exchange March 15. Greg Smith, an executive director at Goldman Sachs, resigned with a blistering public essay that accused the bank of losing its "moral fiber," putting profits ahead of customers' interests, and dismissing customers as "muppets."

Greg Smith has been called many things – flattering and not – since publicly resigning from the storied firm of Goldman Sachs last Wednesday via an op-ed in The New York Times. He has been hailed as a “hero” and a “whistleblower” by some, while called “self-righteous” and deemed a “traitor” by others.

Mr. Smith, in a sense, has become a Rorschach test for our times. We see in him what we value or disdain – depending on our perspective, and perhaps reinforced by generational attitudes.

Those who celebrate Smith’s courage to speak truth to power in such a public forum prize audacity and an uncompromising commitment to ethics – especially on Wall Street. Six months ago, the Occupy Movement became a home for this ethos – people of all ages, but especially the young, speaking out, taking up space, and legitimizing a new conversation about inequality and accountability.

Others value loyalty, seeing Smith as a reckless attention-seeker and believing that honorable workers don’t air an employer’s dirty laundry as a matter of principle. Violating that principle can be costly: Goldman stock dropped $2.15 billion on the day of Smith’s public resignation, which, according to The Atlantic magazine, means his op-ed cost the firm a staggering $1.7 million per word. (The company has since recovered much, but not all, of that loss.)

What Smith himself holds sacred is abundantly clear from his own unequivocal language. “The interests of the client continue to be sidelined in the way the firm operates and thinks about making money,” he wrote. He identified the “decline in the moral fiber” at Goldman Sachs as an existential threat to the company, endangering the client relationship and creating a work environment that is “toxic and destructive.”

In other words, the bottom line, not the spirit of service, became the driving force at Goldman Sachs, according to Smith. That was unacceptable to this young professional who clearly held to the ethos of service above all else – or “servant leadership” in the parlance of business leader and visionary Robert K. Greenleaf.

In 1971 Greenleaf wrote, “It begins with the natural feeling that one wants to serve, to serve first. Then, conscious choice brings one to aspire to lead. That person is sharply different from one who is leader first, perhaps because of the need to assuage an unusual power drive or to acquire material possessions.”

Think it sounds disingenuous or preposterous for an investment banker to be a servant-first leader? You’re probably not alone. The public perception of Goldman’s complicity in the moral downfall of Wall Street and the US economy, culminating in CEO Lloyd Blankfein’s April 2010 congressional dress-down, has left many feeling a range of emotions toward bankers, particularly those at Goldman, but empathy is not one of them.

And yet, one doesn’t have to be a social worker to care about serving others – and surely, Wall Street firms include many such workers of all ages. But for employees in the younger generations, whether they be the children of Baby Boomers, known as Gen X, as Smith is, or the newest Millennials, service comes ahead of profit.

Smith is actually unusual for his generation, having stayed with one firm for eleven long years. His articulation of what he holds sacred, however, is closely in line with generational expectation.

In a 2011 study that asked about the purpose of business, 51 percent born after 1981 cited societal development, while only 39 percent cited profit. (Smith, who is 33, misses that age group – defined in the study as Millennials – by a hair, but he fits the altruistic sentiment.)

The study, done by Deloitte Touche Tohmatsu, surveyed more than 1,000 Deloitte employees and 390 business leaders. It also found that a whopping 92 percent of Millennials believe success should be measured by more than profit, compared to 71 percent of business leaders of older generations.

What’s more, ideas about loyalty are being transformed by the Internet. Young Americans, raised with digital devices always at their fingertips, are becoming what Rebecca MacKinnon, author of “Consent of the Networked,” calls “netizens.” They are loyal to their own ethical values more than company codes or even national boundaries. Smith himself, a South African, was the executive director and head of Goldman’s United States equity derivatives business across multiple continents, indicating that his own ideas about moral and cultural norms were shaped across borders.

Finally, it’s important to note that the youngest professionals are actually consistently found to be more invested in and respectful of authority than their older brothers and sisters. So why might Smith feel entitled to mouth off in the “paper of record” and why would his peers cheer on his audacity?

As young professionals ourselves, we believe it’s precisely because the newer generations respect authority figures that they feel so strongly about holding them accountable. An older Goldman dropout might have privately said, “Of course the culture is dehumanizing and the clients are ‘muppets,’ ” and then grabbed the severance package and retired in style. 

Younger workers believe in their leaders and, therefore, have farther to fall when their beliefs are proven false. Smith did what he did, we suspect, because he was so deeply disappointed by leaders he had once held in high esteem.

He must have believed in the value of servant leadership, no matter what the sector. And he certainly believed in loyalty, not to one company, but to his own innate sense of what was right and wrong.

So do we. So do the majority of the generation just coming into professional power. The implications are actually much bigger than $2.15 billion and stretch far beyond the financial sector. Smith’s actions may well forecast a new era in professional ethics, where workers care more about their own moral compass than company rules.

It’s not that companies competing for young talent need to be perfect. But they do need to strive for meaning, ethical conduct, and a culture of respect for clients and colleagues alike.

The youngest workers out there are more convinced of our interconnectedness than any generation that’s come before and they’ll only increase pressure on the organizations they are a part of to honor this brave new world as well.

Courtney E. Martin is the author of “Do It Anyway: The New Generation of Activists,” among other books. John Cary is the author of “The Power of Pro Bono: 40 Stories about Design for the Public Good by Architects and Their Clients.”

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